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June 19, 2013

LPL’s RIA Platform Hits $50B in Assets

More than 200 firms now custody their assets with the independent broker-dealer—including breakway brokers

LPL Financial (LPLA) said early Wednesday that its RIA platform now has $50 billion in assets under custody, nearly doubling its asset base of a year ago.

"The $50 billion milestone caps five years of remarkable growth for our RIA custody business," said Derek Bruton (left), managing director for LPL Financial, in a press release.

LPL’s RIA platform was used by 152 firms with $27.1 billion in assets as of March 2012. In late May 2013, 208 firms with $50 billion in assets were doing business on the platform.

"We made a calculated decision to focus on this area back in 2008, based on the anticipated success of the then-new hybrid RIA model, which enables both fee- and commission-based revenue opportunities for advisors who operate under their own RIA firm,” Bruton said.

“Our recruitment efforts have been wildly successful, as the number of RIA firms on our platform, and their ability to attract assets, has exploded. We have become the destination of choice for the most successful and sophisticated RIA firms in the industry."

(LPL doesn't disclose the number of advisors on its RIA platform, just the number of firms.)

In early May, for instance, LPL Financial said the Ingham Retirement Group became an affiliate of its broker-dealer and RIA custodial platforms. The Miami-based group has some $1.5 billion in assets under administration ($1.1 billion of which it manages); it includes 12 financial advisors and about 38 other financial profession staff members.

RIA firms on LPL Financial’s custodial platform have the highest average assets under custody—at $214 million per RIA firm—compared to the top five largest custodians at $136 million in AUC per firm, as measured by Cerulli Associates in the group’s RIA Service Agent Survey 4Q ‘12.

In addition, LPL says its offers advisors the “only fully integrated trading and rebalancing system” in the custodial space that allows RIA firms to move easily from model management to trading in one consolidated platform.

Breakaway Brokers

RIAs like Ben Marks, president and chief investment officer of Marks Group Wealth Management in the greater Minneapolis area, which oversees about $500 million in assets, say they are pleased with what the platform can do for their business.

"As the first significant wirehouse breakaway team to become a client on the RIA custodial platform … we are delighted to be part of the platform's continued success story,” Marks said in a statement. “While the vast majority of our business is fee-based, we find the dual registration to be convenient and seamless for our clients whenever they need to undertake a brokerage transaction."

According to Marks, who formerly worked as an advisor for UBS (UBS), the wealth-management firm he leads has been wrestling with the amount of time and resources it spent on non-client-facing activities, rather than growth.

“LPL Financial solves our challenges—from marketing and practice management support, to strategy and turnkey investment management solutions—and frees us to focus on making smart investment decisions for our clients,” he said. “As a result, the growth and expansion of our business has happened at a rapid pace that would not have been possible with any other custodial partner."

When it released its first-quarter results in late April, LPL said assets under custody on its independent RIA platform grew 72.3% year over year to $46.7 billion as of March 31.

"Ultimately, success today in the custodial space comes down to providing independent RIA firms with maximum levels of choice, flexibility and integration of services and solutions,” Bruton said. “Through our broker-dealer structure, corporate RIA and RIA custodial platform, advisors with LPL Financial seek to grow their business under one seamlessly consolidated technology and service infrastructure.”

He says that with capabilities such as retirement plan support, high-net-worth wealth management and business-processing functions (such as LPL’s fully integrated trading and rebalancing platform), it can serve “a broader spectrum of large RIA firms with diverse strategic needs than ever before."